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Zimbabwe miners losing 20% of export proceeds to exchange rate distortions – report

"At $4.4-billion, that's what we are expecting from mineral exports for this year, that's the highest we have ever recorded in this country."

Zimbabwe’s miners are losing 20% of their export proceeds due to a widening gap between the official and black market currency exchange rate, an industry report showed on Wednesday.

The Zimbabwe dollar is trading at 93 to the dollar on the official market, but is quoted as low as 180 against the greenback on a thriving black market.

A survey commissioned by Zimbabwe’s mining chamber found that mining companies were losing money due to the exchange rate mismatch. Exporters from Zimbabwe are required to surrender 40% of their foreign currency earnings to the central bank, in exchange for local currency at the official rate.

“Almost all respondents indicated that the value of the surrender portion that is liquidated into local currency at the official auction rate has been significantly eroded on the back of the parallel market rate which is used for pricing goods and services by local suppliers,” the report said.

“Respondents highlighted that the exchange rate disparities have resulted in mining companies losing 20% of gross export proceeds.”

The mining companies said they were also battling electricity shortages, low levels of investment and the high cost of capital, but despite the challenges, the survey found that miners were more confident about their prospects for 2022 compared to this year.

The report showed an improvement in the confidence index to 17 for 2022 from 9.8 in 2021. The scale ranges from minus 100 for the least confidence, to 100 for the highest.

“Notable among the positive sentiments include optimism about the commodity price outlook, improvement in capacity utilisation and anticipated mineral output growth,” the report said.

Central bank governor John Mangudya, who addressed miners at the launch of the report, projected record high mineral exports this year.

“At $4.4-billion, that’s what we are expecting from mineral exports for this year, that’s the highest we have ever recorded in this country,” Mangudya said.

Zimbabwe earned $3.65-billion from mineral exports last year, with platinum group metals and gold accounting for 82% of the earnings.

Mangudya also promised to let miners retain 80% of their export earnings if they increased production. He did not specify what increase he would like to see. Reuters

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